May 14, 2017
This is more of the “which way is up” problem in economics. Right now, we have lots of economists debating how best to reform the tax code. Most of them see increasing the incentive to save (which means not spending money) as an important goal.
Of course, more saving is not a good idea if we think the economy doesn’t have enough demand to fully employ the workforce. I put myself in the group of economists who hold this view, but we are the minority these days. Most economists think that the economy is pretty close to full employment. That is why the Fed is raising interest rates. Presumably, this is also why people are worried about budget deficits, at least insofar as their concern about budget deficits has any real world rationale.
Anyhow, in this context the NYT is completely off the mark when it tells readers:
“Homeowners are moving less, creating a drag on the economy, fewer commissions for real estate brokers and a brutally competitive market for first-time home shoppers who cannot find much for sale and are likely to be disappointed by real estate’s spring selling season.”
If people are spending less on real estate commissions and other costs associated with buying and selling homes, then they are saving more. Which, according to the economists trying to restructure the tax code, is a good thing. It will leave more resources for investment, leading to more rapid increases in productivity. (Again, I don’t buy this. I think investment is being held back by a lack of demand, but that’s just my fringe position.)
The rest of the claim also doesn’t make much sense. If more people sold their homes and then turned around and bought new homes, this would increase the number of homes for sale, but it would also increase the number of buyers on the market by roughly the same amount. There is only a net improvement for buyers if some of the sellers opt to rent, but the piece is not talking about people switching from owning to renting.
The data also don’t support the claim that people are moving less frequently, as can be seen in one of the charts included with the article. It shows that the most recent rate of sales of existing homes, at 5.7 million annually, is somewhat above the level at the start of the last decade. It is even further above the mid-1990s pre-housing bubble rate. In other words, the rate of sales of existing homes is pretty much back to, or possibly even above, the rate we saw in more normal times — even if it is below the frenzy levels of the bubble years.
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